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Whether you work in construction or another industry that requires heavy equipment to get the job done, Lendio can connect you will the right financing for your business.
The interest rate on a heavy equipment loan can vary widely depending on the size of the loan, your credit score, the age of your business, and if you make a down payment. Generally, you can expect interest rates ranging from 8% to around 29%. Sometimes, equipment dealers will display offers for loans with 0% to 5%, although you usually must have outstanding credit to receive such terms.
According to Lendio’s equipment financing calculator, an equipment loan for $50,000 will have an estimated monthly payment of $2,190, assuming a repayment period of 2 years. This calculation assumes that the borrower’s company has been in business for 3 or more years and the borrower has a credit score of at least 620.
The best way to qualify for heavy equipment loans is to show lenders that you can repay the funding. Lenders may look at your business’s cash flow, credit score, or even your personal credit score.
Less-than-perfect personal credit scores may not prevent you from obtaining a heavy equipment loan. Still, to improve your chances of approval, you may also want to improve your personal credit score. Some of the best ways to go about this are by paying down debt and increasing your debt to utilization ratio. You can accomplish the latter when you increase the amount of credit available to you by paying down existing debt, successfully applying for increased credit, or both.
Many financiers and lenders will want you to have been in business for several years, so your chances for qualification improve over time. Furthermore, you might increase your chances for approval if you are willing to put some money down.
What is Heavy Equipment Financing?
Heavy equipment financing is a type of loan where a lender or other financier provides funding so that a borrower can purchase heavy equipment, like bulldozers. Financiers offer these loans for small businesses that want to work in construction or similar industries but don’t or can’t spend the capital needed to buy equipment upfront. The borrower then repays the loan, with interest, over a specified time period. In heavy equipment financing arrangements, the heavy equipment itself usually serves as collateral for the funding.
Heavy Equipment: Leasing vs. Financing?
Leasing and financing heavy equipment are similar in the fact that the person obtaining the equipment won’t need to purchase the machinery outright before using it. Instead, the leasee or borrower makes monthly payments on the equipment. Still, there are some important differences between leasing and financing that you have to understand.
If you lease equipment, you sign an agreement that is similar to renting it—you agree to pay a monthly fee for a specified time period, like 2 years. At the end of 2 years, you can opt to return the used equipment, buy it, or sign another lease for new equipment.
If you finance equipment, you are applying for a loan for the cost of the equipment and make repayments every month. Once the loan is repaid, you completely own the equipment.
Generally, financing equipment is usually cheaper over the long term than leasing, although the terms of a heavy equipment lease are often less restrictive. You might also find it easier to qualify for a lease than financing. Also consider your situation upon repayment—if you lease, you can then start a new lease for new equipment, while you own your equipment as an asset upon paying off financing. Both have benefits and complications.
Heavy equipment lease:
Heavy equipment loan:
How Hard Is It to Get a Heavy Equipment Loan?
Heavy equipment loans are not as difficult to qualify for as some other forms of financing, like a traditional term loan from a bank. If you have been in business for several years and have a credit score of 620 or above, you have great chances of qualifying. Your qualification probability increases along with your credit score and how long you’ve been in business.
If your credit score is suboptimal or your business is very new, you might still qualify for heavy equipment financing, although repayment terms might not be as good.
In terms of applying, you can easily fill out applications online and see your options within a few moments. If approved, you can often expect to receive your funding in as little as 24 hours.
How Many Years Can You Finance Heavy Equipment?
Generally, heavy equipment financing has repayment terms that are linked to the expected lifespan of the equipment being financed. This is so the borrower isn’t paying a loan on equipment that can’t be used, and so many borrowers will be interested in financing new equipment when a loan is paid down. However, it’s also likely that you will still be able to use the heavy equipment once it is paid off, although it might be obsolete by then. Expect heavy equipment loans to have repayment periods from 1 to 2 years to around 10 years.
Do Banks Do Equipment Loans?
Many banks offer equipment loans for small businesses. If your business has a favorite bank, it is worth seeing if they offer equipment financing. Beyond your neighborhood bank branch, you should research your options, though. You can easily explore the realm of online-only banks or alternative financers with an internet connection. Some of these options might offer better terms than you can find at your local bank branch. The smart thing to do is to research both banks and alternative financers so you can contrast and compare.
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California loans made pursuant to the California Financing Law, Division 9 (commencing with Section 22000) of the Finance Code. All such loans made through Lendio Partners, LLC, a wholly-owned subsidiary of Lendio, Inc. and a licensed finance lender/broker, California Financing Law License No. 60DBO-44694.